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1/14/2018

X-RAYING FG’S NEW STRATEGIES FOR INCREMENTAL POWER SUPPLY

Speaking recently on the critical
sectors under his watch, Minister of Power, Works and Housing Mr. Babatunde

Fashola, stated, “I am concerned about the development of Nigeria, not about
the next election. Enduring development of Nigeria is what drives my decision
about power; it is what drives my decision about roads and what drives my
decisions about housing.”

Fashola said this while
responding to questions during a television programme THISDAY monitored from
Abuja. He said despite the fact that 2018 is a pre-election year and usually a
time when government’s attention is primarily fixed on electioneering
programmes, at the expense of real development programmes, his commitment to
the sectors would remain intact. The minister promised to define the trajectory
of Nigeria’s power sector in 2018.

Promise

From existing statistics, 2018
looks promising for the power sector. That is judging by efforts initiated in
2017, which are expected to advance power supply from the current year. Many
analysts believe that a committed implementation of the Power Sector Recovery
Programme – a plan initiated by the government with support from the World Bank
to optimise the potentials of the power sector – could be a game changer for
the sector. They, however, fear that the 2019 general election could be an upset
to the full implementation of the PRSP.

PSRP to the Rescue

Considered a life saver for the
ailing power sector, the PSRP can be described as the government’s trump card
in its plan to restore the power market to both commercial and technical
functionality. The series of policy actions embedded in the plan, many believe,
would help Nigeria’s privatised electricity market get out of its current
difficulties. The project promises to reset the way the electricity market
operates and equally encourage diverse investments that would develop its
potentials.

The government said it had
embedded in the PSRP, “A series of policy actions, operational, governance and
financial interventions” to be implemented over the next five years, and from
which it hopes to restore the financial viability of the power market. Using
the PSRP, the government would also seek to improve market transparency and
service delivery, take up consumer satisfaction as priority, and reduce losses
and energy theft recorded by the market. All these, it explained, would
holistically add up, in the next five years, to deliver a brand new power
market that would be responsive and responsible.

Starting from 2018, the
government would be expected to use the PSRP to restore the financial viability
of the power market, improve supply reliability, strengthen market’s
governance, and most importantly, place a premium on transparency and
contract-based market. Within the PSRP’s operational timeline of 2017 to 2021,
the government said it would first commit to fund projected future sector
deficits, as well as required market support measures until tariffs are
adequate enough to support the market’s liquidity.

More Generation Capacity Expected

Supported by a N701 billion
payment assurance provided by the Central Bank of Nigeria for the Nigerian Bulk
Electricity Trading Plc to meet its obligations to generation companies,
generation in 2017 grew and new peak records of 5,155.9MW and 5,222.3MW were
reached on December 8 and 18, respectively. Similarly, it was reported that the
country’s generation capacity rose to about 7000MW, and was stable above 4000MW
even during the dry season when the reservoirs of the hydro plants are usually
low on water levels.

In 2018, more generation capacity
is expected.

Moreover, Nigeria’s first
project-financed power plant – the 459MW capacity Azura-Edo power plant – began
to generate electricity for the national grid from its first turbine, the 153MW
capacity GT-11. The plant is expected to come to full generation, and add 459MW
to the grid. Azura-Edo, which achieved its first power out seven months ahead
of its projected delivery date, would complete its cycle of testing on the
plant and fully supply its entire capacity by May 2018.

Other plants include the 40MW
Kashimbila hydro power plant, the 240MW Afam fast power plant, 30MW Gurara
Phase 1 hydro power plant, and 215MW Kaduna gas/LPG/diesel power plant.

If achieved, such improvement in
generation could directly translate to more power supply to Nigerian homes and
offices. It could also mean that homes and offices or industrial outfits would
have to consume less of diesel and petrol to run their independent generating
sets, while saving money on the running and repairs of the generators.

Power Distribution

But there is also the important
factor of the ability of the distribution networks or companies to improve
their capacities to take more power to their consumers, provide meters to end
instances of unfair estimated tariffs, and perhaps conduct appropriate and
factual enumeration of their customer base to determine cost reflective tariffs
to be applied to their consumers.

To address these, Fashola,
indicated that the government would in 2018 initiate a new policy expected to
be driven by the Nigerian Electricity Regulatory Commission to keep the
distribution networks in line with the operational trajectory of the sector.
The minister disclosed that about 2000MW of electricity were left unused in the
system following the inability of the Discos to pick up the loads, and
subsequently asked manufacturing bases and industrial clusters across the
country in need of electricity to take up the excess load through the eligible
customers’ regulation the government signed off in 2017.

NERC has been reluctant to
approve up to three circles of tariff reviews for the Discos due to the
commission’s doubts about the indices used by the Discos to compute their
tariffs, especially the sample size or population of customers in their
network. It is expected that appropriate enumeration of electricity consumers
in Nigeria would be conducted by NERC in 2018, to first establish the true
basis for tariff calibration and subsequently cut down instances of electricity
theft and loss of revenue.

Fashola had explained that it was
impossible to have a fair tariff in an electricity market that has just about
seven million households as its recognised customers out of Nigeria’s 180
million people. He added that proper consumers’ enumeration was required to
establish the true basis for calibrating tariffs in the sector. He also noted
that the Discos would have to improve on their deployment of meters to
consumption points, and that until these were done, approving a cost reflective
tariff for the market looked difficult.

According to the minister, “We
need to do something with the entire value chain, from tariff to metering to
energy conservation, consumer education, to payment of debts by ministries and
departments and ordinary consumers, and all of these are contained in the power
sector recovery programme.

“Tariff is important. My opinion
as at today is that before we can review tariffs, we should increase metering,
we should also increase consumer audit to actually properly dimension the
economy and see whether the unit cost is understated or overstated. Because, if
you have a market, an electricity market where seven million households are all
that is in the database as consuming electricity in Nigeria, I am not sure that
data is correct.”

Transmission

The change of guard at the
Transmission Company of Nigeria has come with improvements on its work ethics
and expansion drive. With a new head, Usman Gur Mohammed, who was seconded from
the African Development Bank, the restructuring in the TCN has brought some
improvements and standards in its projects’ planning and execution capacity.

Upon his resumption in 2017,
Mohammed, who was initially resisted by the labour unions in the firm,
reportedly instituted a good measure of appropriate corporate governance in the
operations of the TCN. He also initiated and completed a financial audit of
TCN’s account that were left unattended to for long and equally decentralized
the process of decision-making to allow TCN’s regional segments act with some
level of operational autonomy.

The TCN has gone on to revamp
transmission projects that had been abandoned, and developed project-based work
plan that has attracted some multilateral investments from the World Bank,
AfDB, and Islamic Development Bank, among others. It equally developed a
Transmission Rehabilitation and Expansion Programme, which would enable it
prioritise and execute critical transmission projects across the country, as
well as clear its stranded containers containing various transmission equipment
at sea ports in Nigeria.

According to TCN, out of 759
containers abandoned by contractors at the sea ports within the last five
years, 454 have been cleared with payment for 193 containers made while payment
for the remaining 112 containers is still outstanding. The company stated that
some of the containers cleared from the ports had been sent to its various
project sites in Yola, Gulak, Katsina,Jos, Dambatta, Ganmo, Abeokuta, Onitsha and Benin, as well as
Odoguyan, Ede, Igangan, Okene, Walalambe, Akwanga, Kachia, Kumbotso and Kaduna.

However, TCN’s record of two
system collapses in the early days of 2018 show that it still has a lot of work
to do. Even though one of collapses was attributed to bush fire, the second
that happened in the Odukpani end of its transmission network, means that
Nigeria’s transmission network is still vulnerable to fluctuations, and would
need to be fixed to guarantee stable transmission of power to distribution
ends.

The TCN stated that it would in
2018 embark on key transmission projects, including the rehabilitation of some
of its abandoned projects. It said through its TREP, which has attracted
significant interest from several donors, like the World Bank that has put in
$486 million, it has set out strategies for completing existing projects either
through in-house capacity or through the fast tracking of existing contracts.

Mohammed told Fashola recently
during the commissioning of a transmission facility, “Through this process,
several transformers and substations will be completed in the first quarter of
2018. This substation reinforcement and many others you would commission
between this month and March 2018, Honourable Minister, are part of the success
of our new strategy in project implementation that significantly empowered the
regional offices.”

He further explained, “As we commissioned
many transformers in TCN, we have discovered that there are several transformer
capacities all over the country that were constrained by transmission line
limitation.

“TCN intends to embark on massive
re-conductoring of transmission lines this year. This is expected to
significantly increase the wheeling capacity of TCN (between 2,000MW to
3,000MW). TCN is already in discussion with World Bank to use the balance in
NEGIP to procure the conductors.”

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